BofA Securities: Cuts WH GROUP (00288) Target Price by 11% to HK$8.5, Reiterates "Buy" Rating, Dividend Provides Support

BofA Securities issued a research report, lowering WH GROUP's (00288) target price by 11% from HK$9.6 to HK$8.5, reiterating a "Buy" rating, while cutting 2026 and 2027 earnings per share forecasts by 8% and 11%, mainly reflecting weak U.S. live hog and pork prices, as well as Smithfield's recent second guidance downgrade since August. The bank expects WH GROUP's Q3 2026 operating profit to decline 31% year-on-year, with net profit down 38% year-on-year, but anticipates a normalized dividend yield exceeding 5%, with dividends expected to provide support. BofA Securities expects WH GROUP's Q3 2026 China business operating profit to decline 14% year-on-year in RMB terms, or 8% in USD terms due to foreign exchange effects; U.S. business operating profit to decline 53% year-on-year, and Europe business to decline 33% year-on-year. Net profit for the period is expected to decline 38% year-on-year, mainly due to WH GROUP's sale of a partial stake in Smithfield on September 8, 2025, shifting the earnings mix toward the China business, which has higher minority interests, as well as one-off gains in Q3 2025. Regarding the China business, the bank attributes the decline mainly to a high base for packaged meats and widening losses in hog and poultry farming; for the U.S. business, fresh pork is the main drag, while packaged meats performance is relatively stable; the Europe business remains weak due to low live hog prices. On dividends, the bank expects WH GROUP's regular dividend per share for 2026 to be 51 HK cents, down from 61 HK cents in 2025, with a payout ratio of 60% and a normalized dividend yield expected to exceed 5%. However, the bank sees upside potential for dividends, as the group's absolute dividend per share has remained flat or increased since 2023, and its China entity, as one of WH GROUP's sources of dividend funding, guides a payout ratio for FY2026 broadly similar to FY2025.